Start with the basics
Ramsey’s first piece of advice was to buy the basics: a mattress, a bed and a used fridge. He recommended a budget of $5,000 for these essential items. “That’s going to leave $15,000 in your emergency fund,” he said. “That way, if you have an emergency, you don’t lose your home.”
To be fair, $15,000 is a sizable cash buffer for emergencies. JPMorgan Chase’s analysis of customer checking and savings accounts found that households in the top quartile of income had median balances around $9,000. Meanwhile, 63% of American workers would struggle to handle a $500 emergency, according to a SecureSave survey reported on by CNBC.
Simply put, Amy would be in a better position than most Americans even if she spent $5,000 on the basics. Ramsey, however, would have preferred a wider cash buffer. “You took it all the way to the edge, kiddo,” he told Amy. “You left no margin in this deal.”
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Accumulate over time
Amy said she earns roughly $5,000 a month through a combination of regular income and military veteran disability payments. Ramsey told her to gradually buy all the other items for her house with a portion of this income. “You’re going to cash flow furnishing this place out of your income,” he recommended.
Steadily purchasing a few items every month should allow Amy to manage her cash flow efficiently. A few hundred dollars on a used dining table or refurbished vacuum cleaner shouldn’t break the bank. “Go to the rich end of town and go to the garage sale,” suggested Ramsey. “You can buy a $9,000 leather couch for $500 … because the [rich] lady redecorated and didn’t like the color [of the couch] anymore.”
Don’t depend on someone you’re not married to
Amy said the plan is for her boyfriend to pay part of the mortgage when they move into her new house, but Ramsey recommended they keep their finances separate. "I don't recommend that you ever buy a house or depend on someone that you're not married to to pay for your house," he said.
Although Amy said she would own the house, it's worth noting that Ramsey has never been a fan of co-ownership, unless it’s between a married couple. The reality is that the high cost of homeownership has pushed more people to consider co-buying. Fifty-three million Americans currently live in properties they co-own with someone they are not married to, according to CoBuy, a platform that helps facilitate such transactions. It estimates that such co-buyers will account for 26.7% of all U.S. home purchases in 2023.
These arrangements can be cumbersome to deal with if the friendship or relationship falls apart.
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